Employees, not employers, should be made to pay the premiums for the government’s proposed pensions insurance fund, according to employer’s group the Confederation of British Industry (CBI).
The proposed fund is intended to protect employees whose firms have gone out of business and cannot meet their pension obligations. Under the proposals, firms operating defined benefit pensions would be charged a compulsory levy to establish a compensation scheme.
But the CBI said that the levy would have the adverse effect of making more companies close their final salary pension schemes rather than underwrite the insurance scheme and risks penalising prudent companies who already provide for their employees by also making them responsible for those companies who do not.
The CBI said that pension scheme members should contribute to the levy, as employers already pay more into schemes than employers.
John Cridland, Deputy Director-General of the CBI said in a letter to the Secretary of State for Work and Pensions, Andrew Smith: "At a time when defined benefit pensions are already declining at an alarming rate, this business levy would further destabilise pension provision rather then strengthen it.
"As employees are the ultimate beneficiaries of pension schemes, it is surely not unreasonable to expect them to contribute to secure their futures.
"Nothing will be gained if companies reduce employee pension benefits to afford the government's levy or if they close final salary schemes all together."
However the CBI’s call has been roundly criticised by unions and some pensions specialists.
David Coats, Head of Economics at the Trades Union Congress, was scathing: "Applying the CBI's logic suggests that employees ought to bear all work-related risks themselves. It means, for example, that employees ought to take out insurance against injuries at work to relieve companies of the ‘burden’ of employers' liability insurance.
"The Pension Protection Fund is a sensible measure to share risk among pension funds and ensure that pensions will continued to be paid even after a scheme has been wound up," he continued. "Does the CBI really believe that the only people who should contribute to household insurance policies are those who have already been the victims of burglary?"
And in a letter to the Financial Times, Keith Wallace, Director of the Beaufort Trust Corporation, said that "the CBI has a dismal record in opposing most intelligent pension reforms and its latest contribution maintains this record."